UK unveils plans for bigger medicines price squeeze

Company payments to government would rise steeply to 2021

Negotiations have already begun on a new UK medicines pricing deal to update the key PPRS system – but the government has also just unveiled plans for its ‘back up’ deal.

The Statutory Scheme is an alternative to the main PPRS pricing agreement, but the government has been squeezing savings out of companies using this system in recent years.

Now, reviewing it in parallel with the new PPRS deal, the government wants to wring more savings out of the statutory scheme.

The proposals have been launched today by the Department of Health and Social Care

The system works by pharma companies making payments based on a percentage of their overall UK sales - this currently stands at 7.8% - but the government has now concluded that this isn’t enough.

It has now unveiled proposals to increase these new annual payment percentages, rising from 9.9% in 2019 to 15.8% in 2020 and finally reaching 21.7% in 2021.

The government has always sought to encourage most companies to join the PPRS system, and this proposal looks very much in line with that policy.

In its impact assessment document, the government forecasts the likely affects on all stakeholders. It predicts that UK shareholders in pharmaceutical companies will see revenues reduced by £163m by 2021, with a resulting loss of profits for UK shareholders valued at £6.8m over the period.

It also predicts that reduced revenue for pharma companies will see R&D investment decline, with a loss of £2.4m to the UK economy over the period.

However it calculates that NHS costs would be reduced by £162m by 2021, allowing extra treatments and services to be provided to NHS patients, producing a forecast extra10,854 QALY by 2021, valued at £947.5m.

It says these patient health benefits will provide a £220m boost to the economy over the period.

Pharma companies who use the scheme – who tend to be small-to-medium sized companies - are certain to be strongly opposed to the plans, which are now open to consultation until Friday 7 September. The new system would then come into force on 1 January, 2019, alongside a new PPRS (or equivalent) agreement.

However the government’s consultation document makes it clear that it sees little merit in maintaining the ‘business as usual’ model, and stressed the need to control NHS expenditure.

Talks on the larger PPRS agreement remain very much confidential, but industry representatives can only hope that the government will approach those with an eye to providing a ‘carrot’ - such as uptake of new medicines guarantees – rather than just the ‘stick’ of increased revenue and profit controls laid out in the statutory scheme proposals.

The UK industry organisations the ABPI and EMIG (the latter representing SMEs) are yet to comment on the statutory scheme proposals, which coincide with the hugely complex and uncertain Brexit plans, which also threaten to make the UK a far less attractive environment for industry investment.